Operating Model Framework

In our operating model series we have previously written about 窶�why窶� you should redesign your operating model. Many companies may be in a situation to review their operating model now because of recent M&A, supply chain disruption from COVID-19, cost increases from global supply risks and other reasons.

But what is the scope of an operating model framework or design? What is important?

The scope of M&A due diligence is well documented and practised. Scope includes financials, products, customers, systems, controls and people to confirm value and minimise risk. As part of the due diligence process, synergies will be identified, and an integration plan developed.

But when the deal is completed, consideration of 窶鷲ow窶� the business works is needed.

Operating Model 窶� Definition

An operating model provides a high-level view of how a company窶冱 processes, people, data and technology interact to support the business. An operating model describes how a company develops and maintains the capabilities required to deliver its strategy and how it fulfils its stakeholder expectations.

In addition to early steps that include an 窶和s is窶� analysis, objectives and principles of a future state, we believe it is important to identify the key defining characteristics of your operating model.

Operating Model 窶� Defining Characteristics

A company should identify those areas of work that truly define the company, operating entity or business unit. Think of having a 窶枠rouped processes窶� view, or parts of your value chain that you would describe to a new manager 窶� then you have your defining characteristics, or building blocks. 窶廾ur business, at the highest level, is made up of these eight defining characteristics 窶ｦ窶� helps to give the whole organisation the framework to then design its operating model.

Process, People, Information and Technology

For Mainsheet, the Process, People, Information and Technology (PPIT) framework provides a simple but systemic approach to then review or design your operating model. Examples of what each element covers are:

Process:    

• Has a business value chain been defined, to then allow development of supporting business processes, procedures, policies and systems?
• Has a clear and transparent RASCI (Responsible, Accountable, Supported, Consulted, Informed) model for decision making been implemented? This normally includes a delegated authority matrix.

People:

• While structure is often seen as a 窶碗uick win窶�, it isn窶冲 just changing reporting lines and names in boxes. Is the structure appropriate for the strategy and the future state design?
• What capabilities do we need in the future, and therefore where are the gaps from our workforce analysis?
• Have other aspects like location analysis, outsourcing and resourcing models been considered in the new way of working?
• What is the culture of the future state operating model and what new leadership is required?

Information:         

• What data is important in the future?
• How can data from the two entities be extracted and consolidated to generate insights?
• What are the critical information and reporting flows?

Technology:          

• What operational technology, support systems and decision tools are needed to deliver the future state design?

Approach

When writing this paper, we have also reflected on how an operating model should be redesigned. The 窶�Critical Success Factors窶� of operating model redesign and change still holds true.

If you are considering an operating model redesign please give one of us a call and we can talk through your situation and needs to help scope an approach that suits your business and situation.

Shane McEwen | shane.mcewen@mainsheet.com.au